Head of Marketing
In a world that feels like it’s upside down with the relentless scourge of COVID still on the attack, it seems like nothing is certain anymore. Every aspect of our lives is changing, transforming, and morphing into something different than it was pre-pandemic. Of course, change can be good, and it should be welcomed. Like executives taking accountability for what they did or failed to do as in the recent headlines.
In this era of cancel culture, one could argue that the bank’s board members took a calculated pre-emptive strike to ward off the risk of being “canceled.” That sounds cynical but it’s a fair opinion given the state of our “me first” world. The move is voluntary, and all 10 Board members are taking a €75,000 pay cut. Arguably peanuts for the bank’s CEO, whose salary increased 20% last year to nearly nine million Euros.
The unprecedented move was in response to the bank’s exposure for inadequate implementation of policies to prevent the unapproved usage of E-Comms channels. With the SEC breathing down the necks of Wall Street’s elite regarding their use of personal devices to transact business and how effectively the firms they represent are documenting E-Comms, the Board’s pay cut may be as strategic as it is intriguing.
And then there’s the virtue signaling aspect that’s casting some skepticism on the impetus behind the gesture. One of the amusing angles on this story is that it apparently wasn’t intended to be public news. “Two people with knowledge of the matter,” as cited in the article, claim that the voluntary pay reduction was to “send a cultural signal” to others at the bank regarding its weaknesses around compliance. Ergo it suggests that all employees of the bank should take this as a notice to stay compliant.
However, the likelihood of any employee voluntarily reducing their pay is highly unlikely. As in, if I was placing a bet in Las Vegas, the odds are 100,000:1 that a single employee steps forward. This means, no way. It’s not going to happen.
It’s a stark contrast to the noble efforts of another firm in the financial services industry. Several years ago, Dan Price, CEO of Gravity Payments, slashed his own salary by one million dollars to raise everyone else’s salary in the company to $70,000. It was reported that “grown men cried.” Not surprisingly, the company’s profits have soared ever since and customer retention is at an exceptional 95%. Rewarding employees for good behavior versus being punitive tends to go a lot further. You know that whole “flies with honey” thing. But Price may not be the model CEO after all given that he has recently been accused of beating his ex-wife and sexually assaulting another woman…
Back to the European bank. Could it be that their move is going to usher in a new trend where executives hold themselves accountable? Token though it may be, a public announcement of an executive’s reduction in pay signals acknowledgment of some transgression that happened on their watch. But it doesn’t appear to be trending.
In fact, a Google search of “voluntary pay cut” turns up quite the opposite set of results. Since the recent market downturn, scores of employees have been asked to voluntarily reduce their salaries for the business continuity of their employers. Or cuts will have to be made. That hardly sounds like a personal choice made without undue influence.
We’ve got to pretty far back into the annals of history to see voluntary pay cuts at the government level. Oklahoma’s Attorney General took a $229 monthly pay cut back in 1983. Former Vice President Biden offered to take a pay cut in 2013 if his staff was going to be furloughed. At that time, a few other government dignitaries like Senator John Kerry and Attorney General Eric Holder also offered to take reductions on the payroll. But that’s about all that a Google search turned up.
On the flip side, there are thousands of posts on the mega-popular subreddit thread, #antiwork. People routinely post how their executives’ pay scales are grossly misaligned with performance with salaries that often exceed that of all their employees’ annual wages combined. Not a whole lot of accountability there.
Going beyond the matter of accountability, the matter of failed enforcement of existing policies for E-Comms documentation and use of approved channels is one that needs to be highlighted further. In this instance, the bank had policies, they just weren’t fully implemented. That fact should have financial firm executives shaking in their shoes. A mere $75,000 pay cut is hardly going to have the same effect.
In practical terms, this insight can be distilled down to a few best practices for compliance. Having policies is one thing, but, as good as they may be if you’re not enforcing them, what’s the point of having them? Fair enough, from a legal perspective, having those policies can serve as an excellent risk mitigation strategy, and then it becomes a slippery slope regarding where the accountability sits.
Bolstering training for all your employees is essential. Recognizing that this may be challenging given our remote work arrangement doesn’t preclude the necessity of finding a way to do so. Training is only one part of the equation. Consequences are the other. If a policy is violated and an investigation has confirmed non-compliance, then there needs to be some sort of punitive measure levied on the offender.
Should the regulatory authorities wish to punish the individuals plus the executives plus the firm appears to be a matter cloaked in a few shades of gray. Perhaps the bank’s move will drive the regulators to provide greater definition around consequences and who – or what entity – is specifically responsible for any transgressions. We’ll have to wait and see how this plays out. Until that time, we’ll leave you with a rhetorical question, would you voluntarily decline some of your salary if you weren’t as compliant as you should be?